Are we due for a massive cyclical U.S. crisis that finally
spurs institutional change? A regular revolution not tied to the
accelerating curves driving so much growth and innovation?
In large nations big spurts of institutional change tend to
occur every four generations (roughly every 88 years, 1 generation
= 22 years) when economic resources trapped by out-dated,
inefficient systems are shifted over to efficient new systems once
societies reach a cyclical tipping point for change. 
Generational theorists Strauss and Howe
call this tipping point a fourth
turning, a point in time where social power shifts to the
generations too young to have witnessed the previous correction.
They liken this pattern to a forest growth cycle: 1) new saplings
take root, 2) the forest grows tall, 3) dead branches fall and
choke off new species, 4) lightning strikes, the brambles burn and
new saplings are free to grow—repeat.
As seen widely in biology, this sort of change is called
Punctuated
Equilibrium, which contrasts with the gradual evolution that
many scientists intuitively believed to be true but ultimately was
not supported by research nor the fossil record. Similarly, the
historical record shows that the United States has regularly
experienced punctuated social crises, aka fourth turnings,
stretching all the way back to its roots in England. And just like
all of the scientists that deny punctuated evolution/development,
there is a huge % of the population that does not intuitively
believe another fourth turning will occur because they have not
encountered the historical evidence and are used to a relatively
stable socio-economic situation. (Ironically, this blindness seems
to be built into the very fabric of our social system and may
result in more efficient growth when looked at from the broader
context of inter-meshed life systems on our planet.)
Like it or not, cyclical crises pegged to
human generations are real and
should be considered when evaluating the future, right
alongside accelerating change. So the questions we need to ask are
1) “When will the next fourth turning begin?”, 2) “Are there any
dynamics that might break or trump the pattern of punctuated
national change every 88 years?”
A Likely Fourth Turning Scenario
79 years ago, on October 24, 1929, the Great Wall
Street Crash sparked the Great Depression and the last U.S.
fourth
turning. What followed was the New Deal Era, WWII, the transformation of most U.S. socio-economic
sectors and ultimately the birth of what we now refer to as “The
American Dream”.
79 years later the U.S. economy is facing a variety of problems
that could spark a down-turn and a new fourth turning. (cont.)
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To effectively solve the present global economic crisis we must first put it in the proper context and learn from the past. This is not being done, and so we may well exacerbate this situation in the months and years ahead.
I’m increasingly worried about our economic crisis and future not not because it’s so unexpected, but because of how complex and deeply systemic it appears to be. The tandem forces of financial erosion and social sector rot have created a situation where it appears our valuation of the whole is seriously out of whack with actual value contained in the U.S. dominated global economy.
Financially, we’re facing up to $2.5 trillion home mortgage losses to US taxpayers, have been losing $2 trillion annually due to regular inflation, will spend up to $2 trillion in Iraq when all is said and done, and must deal with a $500+ trillion gorilla in the room also known as the worldwide derivatives market.
The latter is especially frightening in light of the fact that annual worldwide GDP last year was just $54 trillion, with the U.S. accounting for $14 trillion of that. In other words, the derivatives market (including futures, options and unregulated credit derivatives) is just under 5x the size of the annual global GDP. Back in 2002, this market was approximately $100 trillion, or 2x the annual global GDP. That’s 500% growth in just 6 years, largely attributed to credit, mortgages, hedge funds and other financial vehicles that I don’t fully understand.
Even conservative folks like investment mogul Warren Buffet have labelled derivatives a potential financial weapon of mass destruction because they do not seem to be tied tightly to any base value. Still, derivatives are factored into the valuations of major financial institutions (which are now toppling like dominoes) and, directly or indirectly, most publicly traded companies. So if the derivative market collapses, it’s going to take a huge number of companies with it – many, many more than have already bit the dust.
Now, this is the point in this editorial where I make clear that I am no economist (a line that I’ve now seen written many times by writers and bloggers similarly trying to assess this situation), but... I am still capable of putting 2 and 2 together, which in this case means taking a look at the social structures and markets that appear to be so overvalued by the global and U.S. economic systems.
Socially, we are facing a big infrastructural crumble here in the U.S. that will cost us billions or trillions, our education system is expensive and will costs us billions or trillions in productivity as the economy demands new skills, a similarly rotten private health care system has left millions uninsured and could seriously strain national reserves, an escalating unemployment rate is never a good sign, the federal health standard crisis in nursing homes coupled with a longevity-driven boom in senior citizens indicates additional expenses down the road, stagnation in our national web connectedness may not seem like a big deal but could be the most critical development failure of them all, and so forth – the list goes on and on, and I’m sure you can add multiple items to it.
Worst of all, we’re faced with a government fundamentally incapable of collectively processing and acting on this reality. Due to a combination of institutional inertia and a hugely complex and seemingly mystical problem many systems based solutions are simply not even on the table.
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